A Case Study On Delisting Of Zhonghong Holding Co.,Ltd Under The Background Of The New Delisting System

The low delisting rate in China's capital market has always been a problem and thus the delisting system of China's capital market almost becomes a decoration.No matter the efficiency of the delisting system or the quality of listed companies,there is a considerable gap between China's capital market and developed foreign capital markets.Although many listed companies have poor performance,they can still avoid delisting through restructuring,earnings management and other means,which has led to uneven quality of listed companies in China's capital market.Since 2012,China's securities regulatory authority has become more and more stringent in their supervision of listed companies,and has increasingly stiffened penalties for violations of laws and regulations in the securities field.It has successively revised the delisting rules of listed companies three times in 2012,2014,and 2018,and has standardized high stock dividend behavior that is common among listed companies in 2018.In China's capital market in recent years,there have been a series of delisting cases such as the fraudulent issuance of Xintai Electric,the financial fraud of Boyuan Investment,and the major violation of law of Changchun Changsheng Biology.With the implementation of the new Securities Law of 2020,it is foreseeable that more companies will be delisted in the future.Delisting efficiency and the quality of listed companies will be further improved.Zhonghong Holdings Co.,Ltd.?hereinafter referred to as"Zhonghong Shares"?is the first company in China's capital market to be delisted at par value.Its own equity distribution,corporate governance,corporate strategy and dividend policy all have very serious problems,and these problems are also widespread in other listed companies.It is hoped that the research in this paper can provide some suggestions for other listed companies on how to improve the equity structure and corporate governance system,how to formulate corporate strategies and dividend policies and also provide some inspiration about how to improve China's capital market system and how to improve the quality of investors themselves.This paper analyzes the reasons for the delisting of Zhonghong Shares from the perspectives of its equity distribution,corporate governance,diversification strategy and high stock dividend behavior.In the study of equity distribution and corporate governance,this paper mainly analyzes the influence of excessive equity concentration on corporate governance;When studying diversification strategy,this paper mainly analyzes the motivation,performance and financial risk of diversification strategy;When analyzing the performance of diversification strategy,in order to analyze the performance level of Zhonghong Shares after adopting diversification strategy,this paper selects the main financial indicators from the four dimensions of profitability,debt paying ability,development ability and operation ability to compare with the industry average level;When analyzing the financial risks of diversification strategy,this paper uses a modified Z-Score model,which is the Z₃ model,to analyze the financial risks of Zhonghong Shares before and after the implementation of diversification strategy;When analyzing the high stock dividend behavior,this article studies excess returns of stocks before and after the announcement of the plan,the effect of the Zhonghong Shares'high stock dividend behavior on its stock price,and the economic consequences of Zhonghong Shares'high stock dividend behavior.This paper holds that the delisting of Zhonghong's Shares is the result of its unreasonable equity distribution,defective corporate governance,aggressive diversification strategy and excessive high stock dividend.The over-concentrated ownership structure of the company led to the governance defects.The long period of unbridled control of the actual controller has led the company to be too aggressive in diversifying mergers and acquisitions and in formulating stock transfer plans;The aggressive diversification strategy led to the decline of corporate performance,the increase of financial risks and the capital chain fracture;The continuous high stock dividend behaviors caused the company's equity to increase significantly,and the earnings per share fell sharply.Before and after the announcement of the high stock dividend plan,there was a temporary phenomenon of excess returns in the stock market.However,under the circumstance that the overall operation of the company was not good,the stock price of the company could not timely fill in the right after the removal of rights and dividends,thus continuing to decline,which eventually led to delisting.Other listed companies should optimize equity structure,improve corporate governance,carefully formulate corporate strategy and dividend policy according to their own operation and external policy environment,control the execution pace of the diversification strategy,highlight the main industry,and do not indulge in the short-term stock price increase brought by high stock dividend;China's capital market should also continue to improve the investor protection system,strengthen the supervision of listed companies with concentrated equity,and incorporate more non-financial indicators into the supervision;Investors should establish the concept of value investment,more should not blindly follow the trend of investment in high stock dividend companies.